Artwell Dlamini
14 October 2008
Johannesburg — THE South African National Roads Agency Ltd (Sanral) is concerned at the way "markets have turned", but is confident market turbulence poses no threat to its massive road upgrade, CEO Nazir Alli says.
"Construction projects will continue. The raising of funds will continue," Alli said recently.
Turmoil today presented opportunity for the agency, he said. "We see this as an opportunity to show the investor community that there are good solid projects to invest in real underlying assets," he said.
Sanral is in the middle of a big fundraising exercise to raise R23bn over five years through bond issues ahead of the 2010 Soccer World Cup. Much of the capital raised is earmarked for the Gauteng freeway improvement project.
This project would extend interchanges and crossroads, and install electronic toll collection systems and intelligent transport systems.
The agency had to date raised R2bn with a bond issued in July, and R850m last month despite unfriendly market conditions.
But in the past two weeks the markets had become even more difficult, and this was forcing issuers to boost bond yields to entice investors.
The lending crisis that began in the US and spread globally threatened to raise the cost of borrowing for bond issuers such as Sanral.
In tougher market conditions, panicky investors tend to demand higher risk premium from issuers like Sanral.
Interest rates, which remained unchanged at 12%, did not help matters.
Alli said it was difficult to predict how markets would behave in the future.
He said that when domestic interest rates declined it would lower the cost of borrowing. This would make the agency "smile again".
Alli said the agency was still talking to investment houses in the course of its usual presentations, and the indications were that there was a "lot of appetite for good paper".
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